To the Members of Tech Mahindra Limited
Report on the Audit of Standalone Ind AS Financial Statements
We have audited the accompanying Standalone Ind AS financial statements of TechMahindra Limited ("the Company") which comprise the Balance Sheet as at 31March 2018 the Statement of Profit and Loss the Statement of Changes in Equity and theStatement of Cash Flows for the year then ended and a summary of the significantaccounting policies and other explanatory information (hereinafter referred to asStandalone Ind AS financial statements').
Management's Responsibility for the Standalone Ind AS Financial Statements
The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparation ofthese Standalone Ind AS financial statements that give a true and fair view of the stateof affairs profit (including other comprehensive income) changes in equity and cashflows of the Company in accordance with the accounting principles generally accepted inIndia including the Indian Accounting Standards (Ind AS) prescribed under Section 133 ofthe Act.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding the assets of the Company andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the Standalone IndAS financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.
In preparing the Standalone Ind AS financial statements management is responsible forassessing the Company's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Company or to cease operations or has norealistic alternative but to do so.
Our responsibility is to express an opinion on these Standalone Ind AS financialstatements based on our audit. We have taken into account the provisions of the Act theaccounting and auditing standards and matters which are required to be included in theaudit report under the provisions of the Act and the Rules made thereunder.
We conducted our audit of the Standalone Ind AS financial statements in accordance withthe Standards on Auditing specified under Section 143(10) of the Act. Those Standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the Standalone Ind AS financial Statements are freefrom material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the Standalone Ind AS financial statements. The procedures selecteddepend on the auditor's judgment including the assessment of the risks of materialmisstatement of the Standalone Ind AS financial statements whether due to fraud or error.In making those risk assessments the auditor considers internal financial controlrelevant to the Company's preparation of the Standalone Ind AS financial statements thatgive a true and fair view in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of the accountingpolicies used and the reasonableness of the accounting estimates made by the Company'sDirectors as well as evaluating the overall presentation of the Standalone Ind ASfinancial statements.
We are also responsible to conclude on the appropriateness of management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the entity's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in the auditor's report tothe related disclosures in the Standalone Ind AS financial statements or if suchdisclosures are inadequate to modify the opinion. Our conclusions are based on the auditevidence obtained up to the date of the auditor's report. However future events orconditions may cause an entity to cease to continue as a going concern.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Standalone Ind AS financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Ind AS financial statements give the informationrequired by the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India of the state of affairs of theCompany as at 31 March 2018 and its profit (including other comprehensive income) thechanges in equity and its cash flows for the year ended on that date.
Emphasis of Matter
We draw attention to note 32 of the Standalone Ind AS financial statements in respectof certain matters relating to erstwhile Satyam Computer Services Limited ("erstwhileSatyam") amalgamated with the Company with effect from 1 April 2011 which arediscussed below: Non-compliances of laws and regulations by the erstwhile Satyam under theformer Management (prior to Government nominated Board) identified by various agencieshave been responded to in earlier years and no further communication has been received onthese matters and with the passage of time the Company does not expect any furtherproceedings in this regard.
The Company's management on the basis of current legal status and external legalopinion has concluded that (i) claims made by 37 companies in the City Civil Court foralleged advances amounting to Rs 12304 Million made by these companies to erstwhileSatyam and presented separately under Suspense account (net)' and (ii) the claims tothese advances filed by Enforcement Directorate under the Prevention of Money LaunderingAct in the High Court of Andhra Pradesh will not sustain on ultimate resolution by therespective Courts as explained in the note.
Our opinion is not modified in respect of these matters.
The comparative financial information of the Company for the year ended 31 March 2017prepared in accordance with Ind AS included in these Standalone Ind AS financialstatements has been audited by the predecessor auditor. The report of the predecessorauditor on the comparative financial information dated 26 May 2017 expressed an unmodifiedopinion.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of section 143(11) of the Act we givein the "Annexure A" a statement on the matters specified in paragraphs 3 and 4of the Order.
2. As required by Section 143 (3) of the Act we report that:
a) We have sought and obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purposes of our audit;
b) In our opinion proper books of account as required by law have been kept by theCompany so far as it appears from our examination of those books;
c) The Balance Sheet the Statement of Profit and Loss the Cash Flow statement and theStatement of Changes in Equity dealt with by this Report are in agreement with the booksof account;
d) In our opinion the aforesaid Standalone Ind AS financial statements comply with theIndian Accounting Standards prescribed under Section 133 of the Act;
e) On the basis of the written representations received from the directors as on 31March 2018 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2018 from being appointed as a director in terms of Section164 (2) of the Act;
f) With respect to the adequacy of the internal financial controls with reference toStandalone Ind AS financial statements of the Company and the operating effectiveness ofsuch controls refer to our separate Report in "Annexure B"; and
g) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations on its financialposition in its Standalone Ind AS financial statements Refer note 31 to theStandalone Ind AS financial statements.
ii. The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long term contracts includingderivative contracts.
iii. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Company.
iv. The disclosures in the Standalone Ind AS financial statements regarding holdings aswell as dealings in specified bank notes during the period from 8 November 2016 to 30December 2016 have not been made since they do not pertain to the financial year ended 31March 2018. However amounts as appearing in the audited Standalone Ind AS financialstatements for the year ended 31 March 2017 have been disclosed.
ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT MARCH 31 2018
With reference to the Annexure referred to in paragraph 1 in "Report on OtherLegal and Regulatory Requirements" of the Independent Auditor's Report to the Membersof the Company on the Standalone Ind AS financial statements for the year ended 31 March2018 we report that:
(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.
(b) The Company has a regular program of physical verification of its fixed assets bywhich its fixed assets are verified in a phased manner over a period of three years. Inour opinion this periodicity of physical verification is reasonable having regard to thesize of the Company and the nature of its assets. In accordance with this program certainfixed assets were verified during the year and no material discrepancies were noticed onsuch verification.
(c) According to the information and explanations given to us and on the basis of ourexamination of the records of the Company title deeds of immovable properties/leaseagreements in respect of immovable properties taken on lease are held in the name of theCompany except for the following:
| || || ||Rs is Million |
|Particulars of immoveable property ||Gross Block at March 31 2018 ||Net Block at March 31 2018 ||Remarks |
| ||(Rs Million) ||(Rs Million) || |
|Freehold land located at Bahadurpally Survey No. 62/1A Qutubullapur Mandal Bahadurpally Village District- Ranga Reddy Hyderabad 500043 measuring 581711 square meters ||190 ||190 ||As per the information and explanations provided to us after payment of the stamp duty to the Registrar of the state of Andhra Pradesh the state split into Andhra Pradesh and Telangana due to which the jurisdiction of the registration office has changed. The final demand has not crystallized and the Andhra Pradesh High Court order is not adjudicated. |
|Leasehold Land located at Survey no. 1(P) 3(P) 8(P) 40(P) 7l(P) 109 152(P) MIHAN SEZ Area Nagpur - 441108 admeasuring 518241 square meters ||470 ||434 ||As per the information given to us the Company has not yet received the adjudication certificate. Mutation proceedings will be initiated after the adjudication certificate is received from the authority. |
|Leasehold land located at Plot No. S - 1 Maitree Vihar Road Chandrasekharpur Bhubaneswar-751023 admeasuring 55600 square meters ||5 ||4 ||As per the information given to us the General Administration Department of Government of Odisha has not yet issued the letter communicating the transfer fees to be paid by the Company. On such payment the property will be registered in the revenue records. |
(ii) The Company is a service company primarily engaged in providing informationtechnology and related services. Accordingly it does not hold any physical inventories.Thus paragraph 3 (ii) of the Order is not applicable.
(iii) According to the information and explanations given to us the Company has notgranted any loans secured or unsecured to companies firms Limited LiabilityPartnerships or other parties covered in the register maintained under Section 189 of theAct. Accordingly paragraph 3 (iii) (a) (b) and (c) of the Order is not applicable to theCompany.
(iv) In our opinion and according to the information and explanations given to us andbased on a legal opinion obtained by management the Company has complied with theprovisions of Sections 185 and 186 of the Companies Act 2013 in respect of loans giveninvestments made guarantees and security given.
(v) The Company has not accepted any deposits from the public in accordance with theprovisions of Sections 73 to 76 of the Act and the rules made thereunder.
(vi) The Central Government has not prescribed the maintenance of cost records underSection 148 of the Act for any of the services rendered by the Company.
(vii) (a) According to the information and explanations given to us and on the basis ofour examination of the records of the Company amounts deducted/ accrued in the books ofaccount in respect of undisputed statutory dues including Provident Fund Employees' StateInsurance Income Tax Service Tax Duty of Customs Sales Tax Value Added Tax CessGoods and Services Tax and other material statutory dues have generally been regularlydeposited during the year by the Company with the appropriate authorities. As explained tous the Company did not have any dues on account Duty of Excise.
According to the information and explanations given to us no undisputed amountspayable in respect of Provident Fund Employees' State Insurance Income Tax Service TaxDuty of Customs Sales Tax Value Added Tax Cess Goods and Services Tax and othermaterial statutory dues were in arrears as at 31 March 2018 for a period of more than sixmonths from the date they became payable.
(b) According to the information and explanations given to us there are no dues ofIncome Tax Service Tax Sales Tax Value Added Tax Duty of Customs and Goods andServices Tax which have not been deposited by the Company on account of any disputesexcept for the following:
| || || || || ||Rs in Million |
|Name of the Statute ||Nature of Dues ||Gross amount Rs Million* ||Amount paid under protest Rs Million ||Period to which the amount relates ||Forum where the dispute is pending |
|Income tax Act 1961 ||Income tax ||40 ||- ||2004-2005 ||Supreme Court |
|Income tax Act 1961 ||Income tax ||5970 ||- ||2002-2003 to 2007-2008 ||High Court ** |
|Income tax Act 1961 ||Income tax ||1830 ||- ||2003-2004 to 2011-2012 ||Income Tax Appellate Tribunal |
|Income tax Act 1961 ||Income tax ||2419 ||- ||2005-2006 to 2014-2015 ||Commissioner of Income Tax (Appeals) |
|Income tax Act 1961 ||Income tax ||92 ||- ||2002-2003 to 2010-2011 ||Assessing Officer# |
|Finance Act 1994 ||Service Tax ||12 ||- ||2003-2004 to 2006-07 ||Commissioner of Central Excise |
|Finance Act 1994 ||Service Tax ||4952 ||170 ||2004-2005 to 2015-2016 ||Customs Excise & Service Tax Appellate Tribunal |
|Finance Act 1994 ||Service Tax ||12977 ||224 ||2004-2005 to 2015-2016 ||Supreme Court |
|Andhra Pradesh VAT Act 2005/ Central Sales Tax Act 1956 ||Value Added Tax/ Sales Tax ||231 ||83 ||2008-2009 to 2010-2011 ||High Court |
|Maharashtra Value Added Tax Act 2002 ||Value Added Tax ||8 ||- ||2008-2009 to 2013-2014 ||Joint Commissioner of Sales Tax (Appeals) |
|Central Sales Tax Act 1956 ||Central Sales Tax (Uttar Pradesh) ||3 ||3 ||2008-2009 ||Additional Commissioner of Commercial Tax (Appeals) |
|Central Sales Tax Act 1956 ||Central Sales Tax (Gujarat) ||12 ||7 ||2006-2007 to 2008-2009 ||Deputy Commissioner of Commercial Tax (Appeals) |
|Andhra Pradesh Value Added Tax Act 2005 ||Value Added Tax ||1 ||1 ||2007-2008 2009-2010 to 2010-2011 ||Sales Tax Appellate Tribunal |
|The Customs Act 1962 ||Custom Duty ||1 ||1 ||1996-1997 ||Customs Excise & Service Tax Appellate Tribunal |
|Revenue & Taxation Code USA ||Pennsylvania state Income- tax ||5 ||- ||1988 2005 ||Commonwealth of Pennsylvania Department of Revenue |
|Chad Tax Administration ||Withholding Tax/ Value Added Tax / Corporation Tax ||24 ||4 ||2012 ||Deputy General Manager of Tax Authorities |
|Chad Internal Revenue Act 2000 and Income Tax Act 2015 ||Income Tax / Withholding Tax ||159 ||102 ||April 2013 to March 2015 ||Commissioner General |
|Tax Code Gabon ||VAT and Income-tax ||44 ||6 ||Jan 2013 to Dec. 2015 ||Director General of Taxation |
|Tanzania Revenue Authority ||VAT / Income tax / Withholding tax ||774 ||9 ||2013 and 2014 ||Regional Manager of Tanzania Revenue Authority |
|Saudi Arabia General Authority ||Withholding tax ||69 ||7 ||2007-2009 ||Manager at General Authority of Zakat and Tax |
* Income tax demands are after set-off against carry forward losses of earlier years.
** The above excludes Income-tax Draft Notices of Demand amounting to Rs 7952 Millionand Rs 9637 Million for financial years 2001-2002 and 2006-2007 respectively issued bythe Additional Commissioner of Income-tax under Section 143(3) read with Section 147 ofthe Income-tax Act 1961 against which the Company has filed its objections with theDispute Resolution Panel which is pending disposal.
# The Company is not aware whether the Department has filed an appeal against the same.
(viii) In our opinion and according to the information and explanations given to usthe Company did not have any outstanding dues to any bank government or any debentureholders during the year. The Company has not defaulted in repayment of loans or borrowingsto financial institutions.
(ix) In our opinion and according to the information and explanations given to us theCompany has not raised any money by way of initial public offer or further public offer(including debt instruments) or term loans during the year. Accordingly paragraph 3(ix)of the Order is not applicable to the Company. (x) According to the information andexplanations given to us no material fraud by the Company or on the Company by itsofficers or employees has been noticed or reported during the year. (xi) In our opinionand according to the information and explanation given to us and based on our examinationof the records of the Company the Company has paid/ provided managerial remuneration inaccordance with requisite approvals mandated by the provisions of Section 197 read withSchedule V to the Act. (xii) In our opinion and according to the information andexplanations given to us the Company is not a Nidhi Company.
(xiii) According to the information and explanations given to us and based on ourexamination of the records of the Company all transactions with related parties are incompliance with Sections 177 and 188 of the Act where applicable and the details of suchtransactions have been disclosed in the standalone Ind AS financial statements as requiredby the applicable accounting standards.
(xiv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not made any preferentialallotment or private placement of shares or fully or partially convertible debenturesduring the year. Accordingly paragraph 3(xiv) of the Order is not applicable to theCompany.
(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into any non-cashtransactions with directors or persons connected with them during the year. Accordinglyparagraph 3(xv) of the Order is not applicable to the Company.
(xvi) In our opinion and according to the information and explanations given to us theCompany is not required to be registered under Section 45-IA of the Reserve Bank of India1934.
ANNEXURE B TO THE INDEPENDENT AUDITOR'S REPORT ON THE STANDALONE IND AS FINANCIALSTATEMENTS OF TECH MAHINDRA LIMITED
Referred to in paragraph 2(f) in "Report on Other Legal and RegulatoryRequirements" of the Independent Auditor's Report to the Members of Tech MahindraLimited on the Standalone Ind AS financial statements for the year ended 31 March 2018.
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Act
We have audited the internal financial controls with reference to financial statementsof Tech Mahindra Limited ("the Company") as of 31 March 2018 in conjunction withour audit of the Standalone Ind AS financial statements of the Company for the year endedon that date.
Management's Responsibility for the Internal Financial Controls
The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls over FinancialReporting issued by the Institute of Chartered Accountants of India (ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Company's internal financialcontrols with reference to financial statements based on our audit. We conducted our auditin accordance with the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the "Guidance Note") and the Standards on Auditing issuedby ICAI and deemed to be prescribed under section 143(10) of the Companies Act 2013 tothe extent applicable to an audit of internal financial controls both applicable to anaudit of Internal Financial Controls and both issued by the Institute of CharteredAccountants of India. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects. Our audit involves performing procedures to obtain audit evidence about theadequacy of the internal financial controls system with reference to financial statementsand their operating effectiveness. Our audit of internal financial controls with referenceto financial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the StandaloneInd AS financial statements whether due to fraud or error. We believe that the auditevidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion on the Company's internal financial controls system with reference to financialstatements.
Meaning of Internal Financial Controls with reference to Financial Statements
A company's internal financial control with reference to financial statements is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of Standalone Ind AS financial statements for externalpurposes in accordance with generally accepted accounting principles. A company's internalfinancial control with reference to financial statements includes those policies andprocedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of Standalone Ind AS financial statements in accordance with generallyaccepted accounting principles and that receipts and expenditures of the company arebeing made only in accordance with authorisations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the company's assets that could have amaterial effect on the Standalone Ind AS financial statements.
Inherent Limitations of Internal Financial Control with reference to FinancialStatements
Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.
In our opinion the Company has in all material respects an adequate internalfinancial controls system with reference to financial statements and such internalfinancial controls with reference to financial statements were operating effectively as at31 March 2018 based on the internal control with reference to financial statementscriteria established by the Company considering the essential components of internalcontrol stated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India.
| ||For B S R & Co. LLP |
| ||Chartered Accountants |
| ||Firm Registration No: 101248W/W-100022 |
| ||Jamil Khatri |
|Place: Mumbai ||Partner |
|Date: 25 May 2018 ||Membership No: 102527 |